Market Commentary: The Incredible Speed of Change

It was Agnes Gonxha Bojaxhiu, the Albanian Catholic founder of the Missionaries of Charity, who advised “Never travel faster than your guardian angel can fly.” Born in 1910, Saint Teresa of Calcutta took on the mission of serving the poorest of the poor of all religions in compassionate service spanning 123 countries. In traveling the world over the course of her nearly nine decades, this Nobel Peace Prize winner witnessed astonishing advances in medicine, engineering, and communications while encountering the best and worst of humanity. Mother Teresa understood that the incredible speed of change during the 20th century created countless new moral, ethical as well as practical dilemmas. She called for courageous and inspired leadership in the developed world while tending to her charges – the unwanted, the unloved, the uncared for – in the third and fourth worlds until her death in 1997. In the twenty years since her passing, global developments have not slowed. Things are bigger, faster, even more astonishing. It took more than 200,000 years of human history for the world’s population to reach 1 billion and only 208 years to reach the current level of 7,738,146,000. The world’s wealthiest now count 2,208 billionaires among them. Nearly 1.1 billion fewer people are living in extreme poverty than in 1990, but 1.2 billion still live on less than $1.25 per day. The public and private global debt load at $188 trillion is more than double the size of the world’s economic output. The Voyager 1 space probe is the most distant man-made object from Earth at 13.7 billion miles. The world record for the fastest marathon distance is now one hour 59 minutes and 40 seconds. There are 330 million active Twitter users.

The financial markets have set several records this year. The 30-year Treasury yield fell to an all-time low of 1.95% on August 27. Oil prices temporarily surged by the most on record after the September 14 terrorist attack on a Saudi Arabian processing facility. The rate for general collateral repurchase agreements rose to the unprecedented level of 10% on September 17. Corporate bond issuance set a global record at $308 billion in September. Municipal bond mutual fund inflows have proceeded uninterrupted for 44 consecutive months, a first. The stock market is hitting new highs nearly every day in November; the S&P 500 Index reached 3,093, the Dow Industrials 27,681, and the Nasdaq 8,475 on November 8. Global issuance of corporate and sovereign green bonds is at a new high of $166 billion this year. Saudi Aramco is set to float the largest IPO in history on December 5.

Attention to the central bank angels is diverted for the time being. There is no monetary policy committee meeting this month and futures trading reflects the expectation that no change will be made at the last FOMC gathering of the year on December 11. While traders will monitor the Fed Chair’s testimony before two congressional committees this week, it is now the daily snippets from the U.S. or Chinese trade negotiators that continue to drive the stock, bond and commodity markets. Last week’s giddy optimism over apparent progress brought investors out of safer assets back into riskier sectors, causing bond and gold prices to tumble. U.S. Treasury yields are now up a quarter point on the month: the 2-year closed Friday at 1.67%, the 10-year at 1.94% and the 30-year at 2.42%. Municipals enjoyed another heavy week of issuance but got caught in the same selloff. In November thus far, the 2-year AAA general obligation yield has risen 2 basis points to 1.13%, the 10-year is up 11 basis points to 1.60% and the 30-year has added 16 basis points to 2.22%. Gold prices have fallen $53.41 an ounce to $1,459.

HJ Sims served as lead manager on the $59.4 million Cumberland County Municipal Authority refunding issue for the Asbury Pennsylvania Obligated Group last week. We structured the non-rated bonds with a 2045 maturity that priced with a coupon of 5.00% to yield 3.96%. Also in the senior living sector, the Iowa Finance Authority sold $53.3 million of BBB rated revenue bonds for Lifespace Communities structured with two 2055 term bonds priced at 5.00% to yield 3.64% and 4.00% to yield 4.04%. The Palm Beach County Health Facilities Authority came to market with a second BBB rated issue for Lifespace that also featured two 2053 term bonds priced at 5.00% to yield 3.62% and 4.00% to yield 4.02%. The Louisianan Local Government Environmental Facilities and Community Development Authority sold $46.9 million of non-rated revenue bonds for The Glen Retirement System that included a 2055 maturity priced at 5.00% to yield 4.74%. And the Capital Trust Agency of Florida brought a $33.6 million non-rated transaction for Alura Senior Living priced at par to yield 5.00% in 2049. Among the charter schools in the market last week was a $40.9 million Ba1 rated refunding for Rocky Mountain Classical Academy issued through the Colorado Educational and Cultural Facilities Authority with a 40-year term bond priced at 5.00% to yield 3.78%, and a $14.5 million Capital Trust Agency deal for Ba2 rated Viera Charter Schools that had a 2054 maturity priced at 5.00% to yield 4.375%.

This week’s calendar, although shortened by the Veterans Day holiday, is again expected to exceed $11 billion. HJ Sims is back in the market with the largest senior living financing so far this quarter: the $216.7 million non-rated Shelby County Health, Educational and Housing Facility Board issue for the new Farms at Bailey Station retirement community in Colliersville, Tennessee. Bonds will finance 176 independent living, 52 assisted living, 32 memory care and 60 skilled nursing units. Also on the calendar is a $37.4 million Northampton County Industrial Development Authority sale for BB+ rated Morningstar Senior Living, a $216 million non-rated Wisconsin Health and Educational Facilities Authority for St. Camillus Health System, a $62.8 million Ba1 rated refunding for Doylestown Hospital in Pennsylvania, and a $24 million non-rated Arizona Industrial Development Authority deal for Arizona Christian University. The economic calendar this week includes the consumer, producer, export, and import price indices for October, mortgage delinquencies and foreclosures, jobless claims, Empire manufacturing, business inventories and retail sales. The 30-day visible supply of municipal bonds totals $17 billion.

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